For more information, contact:

Cathy Kawakami,
Advanced Energy Industries, Inc.
970.407.6732
cathy.kawakami@aei.com

Advanced Energy Announces 2006 Second Quarter Financial Results

Revenue increases 11%, net income increases 42% over prior quarter; Operating income up 46% sequentially

FORT COLLINS, Colo., July 26—Advanced Energy Industries, Inc. (Nasdaq: AEIS) today announced financial results for the second quarter ended June 30, 2006.

Sales were $104.6 million for the second quarter of 2006, up 11.3% compared to $94.0 million for the first quarter of 2006, and up 24.2% compared to $84.2 million in the second quarter of 2005. Gross profit was $44.8 million, or 42.8% of sales, in the second quarter of 2006, compared to $38.6 million, or 41.0% of sales, in the first quarter of 2006, and $30.6 million, or 36.4% of sales, in the second quarter of 2005.

Second quarter 2006 income from operations was $19.2 million, or 18.4% of sales, an increase of 45.9% compared to $13.2 million, or 14.0% of sales in the first quarter of 2006. This compares to second quarter 2005 income from operations of $5.0 million, or 6.0% of sales. Second quarter 2005 income from operations includes $1.1 million of restructuring charges.

Second quarter 2006 net income was $18.2 million, or $0.40 per diluted share, up 42.3% compared to net income of $12.8 million, or $0.28 per diluted share in the first quarter of 2006, and $5.9 million, or $0.18 per diluted share in the second quarter of 2005.

Revenue for the six months ended June 30, 2006 was $198.5 million compared to $166.3 million for the first six months of 2005. Net income for the first six months of 2006 was $30.9 million, or $0.69 per diluted share, compared to $6.7 million, or $0.20 per diluted share for the first six months of 2005.

Dr. Hans Betz, president and chief executive officer of Advanced Energy, said, "Sales to semiconductor, flat panel display and architectural glass customers drove much of the second quarter demand with double-digit sequential growth in all three of these core markets. Unit sales of our Pinnacle DC power conversion system, a long-time market leader for a range of PVD applications in our core markets, reached an all-time record level. The recent announcements of power system orders from three solar panel manufacturers further demonstrate our success in leveraging our product portfolio across core and emerging market opportunities."

Dr. Betz continued, "The results of our second quarter exceeded our target financial performance. We delivered 43 percent incremental operating margins for every revenue dollar above $60 million. These are goals that we've been driving toward for the past twelve months, and I thank Advanced Energy's employees for their major contributions and successful execution of these critical corporate objectives. We continue to focus on further improving our financial performance and expanding our market presence in profitable growth areas."

Third Quarter 2006 Guidance

The Company anticipates third quarter sales in the range of $102 million to $106 million, and earnings per share in the range of $0.34 to $0.37, assuming a 12% effective tax rate.

Second Quarter 2006 Conference Call

Management will host a conference call today, Wednesday, July 26, 2006 at 5:00 pm Eastern to discuss Advanced Energy's financial results. You may access this conference call by dialing 888-713-4717. International callers may access the call by dialing 706-679-7720. For a replay of this teleconference, please call 706-645-9291, and enter the pass code 2629324. The replay will be available through August 2, 2006. There will also be a webcast available on the Investor Relations webpage at http://ir.advanced-energy.com.

About Advanced Energy

Advanced Energy is a global leader in the development and support of technologies critical to high-technology, high-growth manufacturing processes used in the production of semiconductors, flat panel displays, data storage products, solar cells, architectural glass, and other advanced product applications.

Leveraging a diverse product portfolio and technology leadership, Advanced Energy creates solutions that maximize process impact, improve productivity and lower the cost of ownership for its customers. This portfolio includes a comprehensive line of technology solutions in power, flow, thermal management, and plasma and ion beam sources for original equipment manufacturers (OEMs) and end-users around the world.

Advanced Energy operates in regional centers in North America, Asia and Europe and offers global sales and support through direct offices, representatives and distributors. Founded in 1981, Advanced Energy is a publicly held company traded on the Nasdaq Global Market under the symbol AEIS. For more information, please visit our corporate website: www.advanced-energy.com.

This press release contains certain forward-looking statements, including the company's expectations with respect to Advanced Energy's financial results for the third quarter of 2006 as well as other matters discussed in this news release that are not purely historical data. Forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Such risks and uncertainties include, but are not limited to: the volatility and cyclicality of the industries we serve including the semiconductor capital equipment and flat panel display industries, the timing of orders received from our customers, our ability to realize cost improvement benefits from the manufacturing initiatives underway, and unanticipated changes to our effective tax rate. These and other risks are described in Advanced Energy's Form 10-K, Forms 10-Q and other reports and statements filed with the Securities and Exchange Commission. These reports and statements are available on the SEC's website at www.sec.gov . Copies may also be obtained from Advanced Energy's website at www.advanced-energy.com or by contacting Advanced Energy's investor relations at 970-221-4670. Forward-looking statements are made and based on information available to us on the date of this press release. The company assumes no obligation to update the information in this press release.

 

   CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
    (in thousands, except per share data)

                                   Three Months Ended       Six Months Ended
                                    June 30,     March 31,      June 30,
                                 2006     2005     2006      2006      2005

    Sales                      $104,571  $84,163  $93,950  $198,521  $166,339
    Cost of sales                59,811   53,517   55,400   115,211   108,371
    Gross profit                 44,760   30,646   38,550    83,310    57,968

    Operating expenses:
      Research and
       development               10,804   10,220   10,459    21,263    20,475
      Selling, general and
       administrative            14,241   13,814   14,405    28,646    26,539
      Amortization of
       intangible assets            453      518      477       930     1,065
      Restructuring charges          31    1,068       29        60     2,330
         Total operating
          expenses               25,529   25,620   25,370    50,899    50,409

    Income from operations       19,231    5,026   13,180    32,411     7,559

    Other income (expense),
     net                            741     (719)   1,833     2,574    (2,806)
    Income from continuing
     operations before income
     taxes                       19,972    4,307   15,013    34,985     4,753
    Provision for income taxes   (1,947)  (1,430)  (2,252)   (4,199)   (1,959)
    Income from continuing
     operations                  18,025    2,877   12,761    30,786     2,794

    Gain on sale of
     discontinued assets            138    2,645       --       138     2,645
    Results of discontinued
     operations                      --      427       --        --     1,244
    Provision for income taxes       --       --       --        --        --

    Income from discontinued
     operations                     138    3,072       --       138     3,889

    Net income                  $18,163   $5,949  $12,761   $30,924    $6,683

    Net income per basic share
      Income from continuing
       operations                 $0.40    $0.09    $0.29     $0.69     $0.09
      Income from discontinued
       operations                 $0.00    $0.09      $--     $0.00     $0.12
      Basic earnings per share    $0.41    $0.18    $0.29     $0.69     $0.20

    Net income per diluted
     share
      Income from continuing
       operations                 $0.40    $0.09    $0.28     $0.68     $0.08
      Income from discontinued
       operations                 $0.00    $0.09      $--       $--     $0.12
      Diluted earnings per share  $0.40    $0.18    $0.28     $0.69     $0.20

    Basic weighted-average
     common shares outstanding   44,704   32,797   44,571    44,638    32,776

    Diluted weighted-average
     common shares outstanding   45,108   33,094   45,004    45,098    32,986



    CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
    (in thousands)

                                                  June 30,        December 31,
                                                    2006              2005

    ASSETS

    Current assets:
         Cash and cash equivalents                 $50,837           $52,874
         Marketable securities                      43,175             6,811
         Accounts receivable, net                   77,719            68,992
         Inventories                                59,822            56,199
         Other current assets                        4,170             6,773
    Total current assets                           235,723           191,649

    Property and equipment, net                     35,461            39,294

    Deposits and other                               1,784             3,808
    Goodwill and intangibles, net                   69,360            69,843
    Customer service equipment, net                  1,632             2,407
    Deferred income tax assets, net                  5,339             3,116

    Total assets                                  $349,299          $310,117

    LIABILITIES AND STOCKHOLDERS' EQUITY

    Current liabilities:
         Trade accounts payable                    $22,283           $22,028
         Other accrued expenses                     26,975            23,977
         Current portion of capital
          leases and senior borrowings               1,136             2,011
    Total current liabilities                       50,394            48,016

    Long-term liabilities:
        Capital leases and senior
         borrowings                                  1,982             2,179
        Other long-term liabilities                  1,280             2,492
    Total long-term liabilities                      3,262             4,671

    Total liabilities                               53,656            52,687

    Stockholders' equity                           295,643           257,430
    Total liabilities and stockholders'
     equity                                       $349,299          $310,117